Chinese cyberwarfare against the U.S. has been going on for a long time. It is finally getting a lot of attention. And even some action. Why doesn’t a $300B annual trade deficit with China get action? I guess cyberwarfare is very direct, in-your-face. And it hits our defense department, and the multinationals, and the finance industry.
Cyberwarfare by China may make the difference in waking us (the U.S.) up.
The Wall Street Journal had a great article on cyberwarfare a couple weeks ago that I’ve not yet blogged about.
For several years, Washington has treated China as the Lord Voldemort of geopolitics—the foe who must not be named, lest all economic and diplomatic hell break loose. That policy seemed to be ending in recent weeks, and Timothy Thomas thinks it’s about time.
The Lord Voldemort metaphor is really apt. I can’t tell you how many people say that we can’t say bad things about China. Well… you can and you should when they misbehave. When they do bad things. You simply say… “those bad things they are doing… are bad.” Let’s stop them. Or neutralize them. Let’s defend our national interest. Not war or anything. But other tools. Like trade legislation.
The Bush Administration was no good on the issue. Neither has been Obama. But is the administration naming Lord Voldemort now?
The clearest sign of change came in a March 11 speech by Tom Donilon, President Obama’s national security adviser, who condemned “cyber intrusions emanating from China on an unprecedented scale” and declared that “the international community cannot tolerate such activity from any country.” Chinese cyber aggression poses risks “to international trade, to the reputation of Chinese industry and to our overall relations,” Mr. Donilon said, and Beijing must stop it.
“Why did we wait so long?” wonders Mr. Thomas as we sit in the U.S. Army’s Foreign Military Studies Office, where the 64-year-old retired lieutenant colonel has studied Chinese cyber strategy for two decades. More than enough evidence accumulated long ago, he says, for the U.S. to say to Beijing and its denials of responsibility, “Folks, you don’t have a leg to stand on, sorry.”
You know the game if you’ve ever been involved with bullying on the playground. Bullies thrive in the dark and they are energized by acquiescence. My son was bullied in soccer. He took it and was convinced he should say nothing. I found out after a while, immediately went to the school. The school told the bully he was accused of bullying, asked for his side, gave a warning, and the bullying stopped… at least for my son. Because there were consequences. The bully apparently continued pestering kids who did not cause consequences.
China’s aggression has so far persisted, Mr. Thomas says, because “it makes perfect sense to them.” The U.S. has difficulty defending its cyber systems, the relatively new realm of cyber isn’t subject to international norms, and years of intrusions have provoked little American response. “I think they’re willing to take the risk right now because they believe that we can’t do anything to them,” he says. “You have to change the playing field for them, and if you don’t, they’re not going to change. They’re going to continue to rip off every bit of information they can.”
It is not PC to say it. But it must be said. China’s military and a portion of the communist party leadership views the U.S. through a military aggression lens. They act in warlike ways with tools that do not include missiles. Their military has written about Unrestricted Warfare since 1999 and before.
A 1999 book by two Chinese colonels put it more aggressively (albeit in a sentence as verbose as it is apocalyptic): “If the attacking side secretly musters large amounts of capital without the enemy nations being aware of this at all and launches a sneak attack against its financial markets,” wrote Qiao Liang and Wang Xiangsui, “then, after causing a financial crisis, buries a computer virus and hacker detachment in the opponent’s computer system in advance, while at the same time carrying out a network attack against the enemy so that the civilian electricity network, traffic dispatching network, financial transaction network, telephone communications network, and mass media network are completely paralyzed, this will cause the enemy nation to fall into social panic, street riots, and a political crisis.” No kidding.
The trade deficit we have with China is a major part of the warfare. They are siphoning off our industrial capacity at volumes that are without precedent. It is systemic and our industries choose to move there or buy from there. Prices made cheaper, so we voluntarily buy from there (due to currency manipulation, VAT rebates, state subsidies, etc.). Requirements to build there to sell there.
These trade tactics are not new in the world. But China has taken them to a new level. And they have a comprehensive plan to be the biggest economy in the world, from which will follow the biggest political and military power in the world.
If the U.S. national interest means anything, Congress and the Administration need to get mobilized on cyber warfare, trade, and more. Not militaristically, but at least symmetrically. Because the warfare has been asymetrical so far, and our side can’t quite see the war. But it’s about 20 years old now. Since China devalued its currency in 1994.
A $300B annual trade deficit with China goes to finance nuclear development in North Korea, a military buildup in China, a carbon pollution explosion in China, a gigantic real estate bubble in China, a cyber security threat, a bird flu threat, toxic counterfeit exports to the U.S. and elsewhere and the list goes on.
There is still one more Lord Volemort not mentioned here. We read about China’s “currency manipulation, VAT rebates, state subsidies, etc” but not one word about the wage differential.
Paul Craig Roberts, in his new book “The Failure of Laissez Faire Capitalism and the Economic Dissolution of the West,” tells us that fully one half of China’s exports to the USA are the off shored production of US companies. Dr. Roberts compares the average cost of US labor to that in China, and finds a wage differential that dwarfs the effects of currency manipulation or tax policy:
EXCERPT:
…it is US corporations that move their factories abroad, thus replacing domestic production with imports. Half of US imports from China consist of the offshored production of US corporations. The wage differential is substantial. According to the Bureau of Labor Statistics, as of 2009, average hourly take-home pay for US workers was $ 23.03. Social insurance expenditures add $ 7.90 to hourly compensation and benefits paid by employers add $ 2.60 per hour for a total labor compensation cost of $ 33.53. In China as of 2008, total hourly labor cost was $ 1.36, and India’s is within a few cents of this amount. Thus, a corporation that moves 1,000 jobs to China saves saves $ 32,000 every hour in labor cost. These savings translate into higher stock prices and executive compensation, not in lower prices for consumers who are left unemployed by the labor arbitrage.
END EXCERPT
James Rickards, on p. 112 of his book “Currency Wars,” says there is “scant evidence to support a linkage between jobs and exchange rates” and would appear to agree with Paul Craig Roberts when he argues “it seems unlikely the typical North Carolina furniture maker would be willing to work for the $118 per month made by his Chinese counterpart. Even if the yuan doubled in value, the Chinese furniture maker would earn only the equivalent of $236 per month…”
No doubt we must stand up to China’s cyber-warfare, but in the larger picture of America’s disintegrating economy, we shouldn’t expect tax or tariff or currency solutions will fix the offshoring of our industries and jobs and GDP and future.
Blaming China seems an exoneration of the Congress and Administrations of both major parties that have been bought by the 1% who have grown fabulously rich through the globalized corporations they own and run. It is in Washington DC where the trade policies have been made by politicians bought by that 1% who have zero loyalty to America. What about the role of these corporate executives and their politicians in Washington? They are the ones dismantling our national economy, not the Chinese. The American people are being screwed by Democrats and Republicans more than they are being screwed by China. And the American economists justifying so-called “free trade” offshoring are the ideological servants of the 1% who must be held responsible as well.
The trade deficit is one measure of the offshoring, but the central loss of it all is the 20 million job deficit from the past 12 years. The most direct remedy, with guaranteed results, would be a Balanced Trade policy using Import Certificates issued in the same value as our exports. It would be legal under the terms of our WTO membership. It would have the effect of requiring corporations to invest and employ in the US if they want to sell products here. It would divert $600billion every year from imports into American industry, creating millions of jobs directly and millions more through the multiplier effect. No need for China or any other country to rescue America. It could be done right from Washington DC if our country weren’t ruled by traitors selling us out.
Is the cooking of the accounting and fiscal books using ERP a reality?
The true is that the “Freshers” coming from India and working mainly in the foreign socialist and communist IT monopolies believes seriously that the ERP are capable to solve any situation for any company and any part in the world in accounting and controlling.
They created a complicated ERP questions and answers but not a complicated international accounting and controlling questions and answers, lying themselves and others that it is true that the ERP can solve all the accounting and controlling issues worldwide. The real situation is that in accounting, for example for NAFTA, the NAFTA accounting committees are trying to unify standard accounting principles but this is not ended yet, so USA CPA is not reliable for a Mexican CPA and vice versa, you have to present the tests in each country. Companies using the ERP haven been cheated by this Indian origin IT companies mainly and for the “Freshers”.
On the other hand in controlling, industrial engineering and Operations Research techniques are not integrated scientifically in the ERP, and most of the mathematical models are not included in the ERP when there are lot of real situations that have to be analyzed to choose the best mathematical model to increase performance and productivity, we have to go case by case. Techniques like the ABC in most of the cases were not implemented in rigorous scientific way if it was implemented correctly, so American companies are not competitive any more around the world.
The Big´s Accounting firms allow these situations to take over accounting control on most of the American companies because internal accountants were used less (people reduction) thinking and applying these magical solutions. And the shareholders were impressed by the profits and they did not take the time to review carefully the accounting changes in the American accounting of their companies. This is only part of the fraud in USA, also lack of taxes payment around the world because of these Indian origin companies and freshers is a fact in business.